Exam MAS-I Practice Question 7
Study guide: Exam MAS-I
Ground-up loss severity X has a continuous distribution on (0, \infty) with finite mean. Next year every loss will be 10% larger. Policy terms are fixed in dollars unless a statement says otherwise.
Determine which of the following statements about the insurer's expected payment per loss are true.
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I. Under an ordinary deductible with no policy limit, it rises by more than 10%.
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II. Under a policy limit with no deductible, it rises by more than 10%.
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III. Under 80% coinsurance with no deductible and no limit, it rises by exactly 10%.
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A) I only
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B) I and II only
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C) I and III only
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D) II and III only
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E) The answer is not given by (A), (B), (C), or (D)
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